Sandford Borins

Sandford Borins, Ph.D.

Sandford Borins is a Professor of Management at the University of Toronto. He writes, blogs, and teaches about narrative, information technology, and innovation.

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December 3rd, 2009

Highway 407 Revisited

Government

Just as Highway 61 (running from New Orleans to Duluth, Minnesota) kept reappearing in Bob Dylan’s life, Highway 407 ETR keeps reappearing in mine. I co-authored a book about it six years ago (If You Build it … at www.407etrbook.com), and I get asked to comment on its ongoing controversies.

I was just on Goldhawk Live on Rogers television, along with Ontario Transport Minister Jim Bradley, NDP transportation critic Peter Tabuns, Toronto Star reporter Jack Lakey, editor of Road Today magazine Manan Gupta, and a host of irate callers. The callers were incensed about several billing policies, including Ontario vehicle license denial for unpaid bills, attempts to collect unpaid balances going back up to 15 years, and 27 percent annual interest rate charges.

At the outset, it’s important to understand that 407 ETR’s business model is unlike most services in the economy (including old fashioned toll roads with collection booths) in that you can use it before you pay for it. This gives the operator, 407 ETR Concession Company Ltd., an incentive to be aggressive in collecting unpaid bills. What the operator prefers is that users lease transponders and have charges automatically billed to their bank account or credit card. Transponders are accurate virtually all the time. The $3.50 per trip collection fee imposed on video imaging is a strong incentive to lease a transponder, which costs $21 for a yearly lease.

By way of personal disclosure, I should say that I make about 20 trips yearly on 407 ETR and have had a transponder since the highway opened in 1997. I’ve had two small problems, a transponder’s battery wearing out and a transponder not functioning because I had placed it behind a metallic windshield sun shade, and both were handled quickly and videoimaging charges were refunded.

My guess is that somewhere in excess of 80 percent of the operator’s revenue comes from transponder users like me. As Pareto’s Law would predict, the administrative problems come from users who don’t have transponders. In an interview two years ago with co-author Chandran Mylvaganam and me, the operator’s spokesman told us that approximately 4 per cent of 407 ETR’s traffic is not billed, which includes both licenses that are not readable and those that are not billable because they are from jurisdictions that have not agreed to make their vehicle license data available. License plate denial is a very powerful mechanism for ensuring that Ontarians pay up, but of course it doesn’t extend beyond Ontario’s borders.

We heard numerous complaints on the program and it is hard to assess their validity. The most common complaint linked the three issues mentioned at the outset, claiming that the operator was deliberately taking its time billing, letting interest accumulate at a very profitable 27 percent per annum, and then using the threat of plate denial to collect.

If these accusations are true, they are a legitimate public policy concern. The question for a policymaker is what to do about them. Ontario Transport Minister Jim Bradley, citing the province’s failure to challenge the original privatization agreement in court, said that there was essentially nothing that could be done. The other panelists, myself included, weren’t so sure. Two possible approaches are suasion and legislation. Suasion would involve the government (perhaps the Ministry of Consumer Services rather than Ministry of Transport) gathering information about these complaints and presenting them to 407 ETR’s ombudsman and then the operator.

The operator is a Spanish-Australian consortium that has preferred to maintain a low public profile and collect the revenues rather than present itself as a high-profile good corporate citizen. This would suggest the government would get nowhere with suasion and the implicit threat of “naming and shaming,” but would have to legislate.
The legislative approach would not involve challenging the lease agreement, which the courts have already defended, but rather drafting consumer protection legislation applicable to all current and future Ontario toll roads, or perhaps even more broadly. This would require legal advice as to whether the courts would likely rule that such legislation contravenes the operator’s lease agreement.

Lurking down the road is an issue mentioned by Minister Bradley in the discussion, namely the development of Highway 407 East, a toll road running from the eastern end of 407 ETR in Pickering to Highway 35/115. The minister promised that the government would not repeat the mistakes of the past and 407 East would be built and run entirely by the government. A moment’s consideration suggests that likely will not come to pass. If it did, people would have to carry two transponders, one for 407 ETR and the other for 407 East, and would receive two bills for a single trip using both parts of the highway.

While the minister claims that this will lead to competitive benchmarking because drivers will compare the two operations, it is more likely that drivers will tell the two operators to get their acts together. In addition, obvious economies of scale will give both an incentive to make their technologies at least interoperable, and more likely completely integrated. Finally, by virtue of having developed and operated 407 ETR for over a decade, 407 ETR Concession Company Ltd. will have an enormous advantage over any other potential bidders for contracts on the development of 407 East. When the government moves to the contracting stage for Highway 407 East, it and 407 ETR Concession Company Ltd. will have to begin talking in earnest.

So if I were the Ontario Government, what would I do now? I’d gather information about billing practices and, if there are some that appear questionable, I would meet with the ombudsman and the operator. I would also get counsel to look at the question of whether consumer protection legislation would escape being over-ridden by the lease agreement. And I’d recognize that Minister Bradley’s “two operators, one highway” line will ultimately be untenable, and the two operators will have to talk about interoperability and integration.

November 26th, 2009

In the Loop? Not Really

Narrative

The movie In the Loop, released last summer in the cinemas and on DVD last week, is the successor to Armando Ianucci’s 2005 television series The Thick of It (the subject of my post last March 13). The series received considerable recognition when initially released, then was cancelled after its costar, Chris Langham, who played a cabinet minister, was convicted and served time for possessing child pornography – no, I’m not making this up.

The television series is the latest instance of the dominant fable of modern British politics, established three decades ago by the classic television series Yes Prime Minister. In this view, politicians and public servants are entirely and narrowly self-interested, and for them the quaint notion of public interest has no meaning, except as a pretext for power seeking.

The Thick of It, spoofing Blairite government, focused on the adversarial relationship between Secretary of State for Social Affairs Hugh Abbott and the prime minister’s Communications Director Malcolm Tucker. Their main concern was how policies, or more often policy gimmicks, would play in the media. Tucker, played by Scots actor Peter Capaldi, was a bespoke bully – expensively suited, spouting an inexhaustible stream of violent and profane invective.

The movie is also squarely within the dominant fable of public sector self-interest, but the context is considerably different. A hapless minister, Simon Foster, makes an unscripted reference to a war in the Middle East being “unforeseeable,” which puts him at odds with evolving United States and British government policy. The reference, of course, is to the Iraq war of 2003, when the Britain Government joined George Bush’s “coalition of the willing.”

Minister Foster is sent to Washington to meet with the Americans, and followed by Malcolm Tucker. The movie then focuses on the mid-ranks of the American bureaucracy: two feuding assistant secretaries of state – one a dove and the other a hawk – and a general. The president, prime minister, and senior cabinet secretaries or ministers on either side are never seen, nor are any senior advisers other than Tucker.

The rest of the plot involves jockeying for influence among these mid-level players. The ultimate decision to go to war is made at a higher level, unseen in the movie. Thus, the movie’s title, “In the Loop,” can be read satirically, because, as my title for this post implies, none of the characters encountered in the movie are in the loop where the real decisions are made.

There was considerable difference of opinion among movie critics regarding the effectiveness of this narrative. A.O. Scott, in The New York Times on July 24, 2009, wrote that “The audience is likely to die laughing. While “In the Loop” is a highly disciplined inquiry into a very serious subject, it is also, line by filthy line, scene by chaotic scene, by far the funniest big-screen satire in recent memory.” He concluded that “the people in whose hands momentous decisions rest are shown – convincingly and in squirming detail – to be duplicitous, vindictive, small-minded, and untrustworthy. But why should they be any different from the rest of us?”

In contrast, Anthony Lane, in the New Yorker on July 27, 2009, wrote that “by the end of the film, you just want to get away from these people” and “for the makers of “In the Loop,” everyone in politics is either a beast or a dithering dolt, there is no basis for public service other than the foaming rage for power, and anyone who dares to dream otherwise – anyone who enjoys

November 19th, 2009

The TTC Fare Increase: How Technological Backwardness Begets Operational Stupidity

Government

Toronto transit riders are facing a fare increase at year-end and, because tokens are undated, the TTC has reduced their availability, thereby generating long queues and consternation on the part of riders.

By way of personal disclosure, I should say that I’ve seen this scenario played out often enough to know what was coming, so when I saw the first mention in the newspaper of possible fare increases I began hoarding. And last Sunday afternoon, despite the sign on the ticket booths indicating token sales were limited to five to a customer, a helpful agent was willing to sell me ten. I now have a cache of 23 tokens, which should be sufficient for my infrequent TTC trips over the next six weeks.

Recalling the TTC’s own slogan, is there a better way? Let me suggest two.

The first would be for the TTC simply not to restrict the sale of tokens, accept that there will be some loss of revenue due to hoarding, and recognize that it is the inevitable cost of maintaining good customer relations. That is what Canada Post does by selling perpetual (P) stamps valid at any time, rather than requiring customers to buy additional stamps every time rates go up.

A second solution would be to adopt better, more flexible pricing technology. Twenty-five years ago – that’s right, twenty-five years ago – I was in Hong Kong and saw how their subway system used what were called Common Stored Value Tickets. You bought a ticket for a certain value, and on every trip the automated card readers would deduct the price of that trip, until the ticket was used up. If the TTC had such a system today, fare changes would be easily implemented by increasing the amount deducted from the card on the day the new fares come into effect.

From a broader public policy perspective, I don’t think ever-increasing transit fares are the way to go. The better way would be to increase transit ridership and decrease automobile traffic in the core. The best way to do that, as has been demonstrated in London and Stockholm, is through an area pricing scheme, where road tolls are used to fund improvements in the public transit system. At the limit, I’d even support making transit free to riders, and fund it entirely through road tolls.

Highway 407 was an early foray into leading edge road tolling, so the technology exists right in our own backyard.

Let’s see if next year’s mayoral candidates are far-seeing enough to embrace these ideas. The one least likely to do so is the unimaginative stuffed shirt John Tory, who in the 2003 mayoral campaign even went so far as to set up a website attacking David Miller’s willingness to contemplate road tolls. Maybe next time will be different.

November 11th, 2009

Two Winning Economic Stimulus Projects

Government

As the Government of Canada rolls out its Economic Action Plan, I have two projects that, as far as I can tell, are not under consideration for funding. In the interest of full disclosure, I should say that I’ve visited both several times with my children, and we’ve talked about how to improve these two museums.

The Canadian Air and Space Museum (casmuseum.org) is on the site of the former Downsview airport in suburban Toronto. The museum is smaller than the Canadian Aviation Museum in Ottawa, but offers a different perspective, focusing its attention on the aircraft manufacturers, particularly De Havilland and A. V. Roe, which were both located in Toronto. It contains the only full-size replica of the Avro Arrow as well as a Canadian-built World War II Lancaster bomber that a group of dedicated amateur machinists is laboriously refurbishing.

The museum is attempting to raise $2 million in funds for a major expansion to highlight the role of the different manufacturers. The website contains a pitch from actor Harrison Ford, proclaiming the virtues of Canadian designed and manufactured aircraft, such as the Twin Otter.

I would have thought supporting the museum would readily appeal to the Harper government. It’s in multicultural northwest Toronto, an area where the Conservatives would like to make inroads. It would send messages about government support for manufacturing and for Canada’s armed forces. Yes, the Avro Arrow exhibit criticizes John Diefenbaker, the PM who decided to kill the Arrow, but I would hardly think the current-day Conservative Party – less than a decade old – considers itself accountable for Dief’s decisions half-a-century ago.

The second project is the Canadian Automotive Museum, which occupies a 25,000 square foot former dealership in an aging section of downtown Oshawa. The Museum has a superb collection of vintage cars going back to the 1910′s, with a particular emphasis on those manufactured in Canada.

The building is too small so the collection is very crowded. It is also in poor shape, for example the heating is insufficient for it to be comfortable in the winter. If the museum were in better shape, or in a better location, it could display its collection in the context of the history of Canadian automobile manufacturing, and launch a discussion about the economic, social, and environmental impacts of the automobile.

Developing this museum would also appear to be a no-brainer. The local MP is Conservative Finance Minister Jim Flaherty. The museum is about a vital part of Canada’s industrial heritage, which would appeal to the government’s values. So why, in this case as well, isn’t funding from the Economic Action Plan available? Isn’t the museum’s board knocking on the door of their powerful local MP? If they are, why isn’t that MP speaking up for his constituents?

Both these museums are about important chapters in our industrial heritage, and spending stimulus money on them would be a great idea. I hope it happens.

November 5th, 2009

The Master of Motivation

Narrative

With the sequel to Wall Street currently in production, I want to look back at one of the most memorable scenes in the original. Not the famous “greed is good” speech, but rather a scene early in the movie (33 minutes in, chapter 7 on DVD) in which corporate raider Gordon Gekko (Michael Douglas) convinces his prot